Long Distance Int'l v. Telefonos de Mexico

• Citation: 49 S.W.3d 347
• Decision Date: 14 June 2001
• Docket Number: No. 00-0229,00-0229
• Parties: (Tex. 2001) Long Distance International, Inc. and Star Marketing Service, Inc., Petitioners v. Telefonos de Mexico, S.A. de C.V., SBC International, Inc., and SBC Communications, Inc., Respondents
• Court: Supreme Court of Texas

Page 347

49 S.W.3d 347 (Tex. 2001)

Long Distance International, Inc. and Star Marketing Service, Inc., Petitioners v. Telefonos de Mexico, S.A. de C.V., SBC International, Inc., and SBC Communications, Inc., Respondents

No. 00-0229

Supreme Court of Texas.

Argued on February 21, 2001

Decided June 14, 2001

On Petition for Review from the Court of Appeals for the Fourth District of Texas

Justice Baker delivered the opinion of the Court.

This case involves two issues: (1) whether the plaintiff's contracts with Mexican customers in this case violated Mexican law, and, if so, (2) whether that illegality is a defense to the plaintiff's claims. Because we hold that the plaintiff's contracts did not violate Mexican law, we do not reach the second issue. Accordingly, we reverse the court of appeals' judgment and remand the cause to that court to determine whether any other asserted ground supports the trial court's summary-judgment order.

I. BACKGROUND

In 1976, the Mexican government granted Telefonos De Mexico (Telmex) a thirty-year exclusive concession to build, operate, and exploit public telephone service in Mexico. In 1990, the government amended the concession to facilitate the eventual transition to a competitive telecommunications market beginning in 1997.

SBC Communication (SBC) owns ten percent of Telmex's stock. SBC International (SBI), a wholly-owned subsidiary of SBC, assists Telmex with organization and development. The Office of the Secretary of Communications and Transportation (SCT) is a Mexican government administrative agency that oversees the country's telecommunication services. MCI, Long Distance International (LDI), and Star Marketing Services (SMS) are United States telecommunications companies.

When calls originate from Mexico to the United States, the call's Mexico leg is carried on Telmex's wires up to the border. The call's United States leg is then picked up by a United States carrier's line (here, MCI). Because the call originates in Mexico, Telmex bills the Mexican customer and reimburses MCI for its carrying the call's United States leg. When a call to Mexico originates in the United States, this process is reversed, with MCI billing the American customer and reimbursing Telmex for the Mexico leg. The carriers contractually set these "settlement amounts."

In 1992, Telmex and several United States carriers, including MCI, entered into agreements to provide International 1-800 services ("I800"). Usually, I800 calls are free to the caller and billed to the receiver. The agreement between MCI and Telmex established the billing amount for each leg of the I800 calls and contained the monthly settlement amounts between the companies.

MCI then entered into I800 agreements with three different types of United States customers. The first category was "end users." End users give their I800 number acquired from MCI to Mexican callers who in turn call the end user on that number to purchase goods or services. Rather than Telmex billing the Mexican caller, MCI bills the end user for the entire cost and then reimburses Telmex for the Mexico leg.

The second category of MCI's United States customers included other phone companies such as LDI and SMS, the plaintiffs here.¹ SMS contracted with MCI to receive I800 numbers that SMS supplied to LDI. LDI then contracted with Mexican callers rather than American end users. Under these contracts, LDI provided a Mexican caller with an I800 number linked to a Texas switching station. When the I800 number answered, the Mexican caller received a dial tone allowing them to call another United States number. LDI would bill the Mexican caller and pay MCI (through SMS) for the I800 number's use. MCI would then reimburse Telmex for the Mexico leg. Consequently, Telmex only set the rate for the Mexico leg. However, had the Mexican customer called its United States destination directly, Telmex could have set the Mexican customer's rate for the entire call.

The third category of MCI's United States customers included phone companies engaging in "call-back" services. These companies also provided I800 numbers acquired from MCI to Mexican callers. The I800 numbers were linked to a "caller-ID" system. So, when a Mexican customer called the I800 number, the call would not be answered, but the caller's number was electronically recorded. Then the Mexican customer would receive a call back, which would provide the caller with a dial tone to call anywhere in the United States. As in the second category of MCI customers, these American companies would bill the Mexican caller directly. However, because the call originating in Mexico was not answered, neither the caller nor the company would pay Telmex for the unanswered call. Instead, Telmex was only reimbursed for the Mexican leg of the call back, just as with any other call originating in the United States.²

A dispute about the I800 services first arose in 1993. In October, Jose Maria Rivas Moncayo, a SCT manager, wrote MCI a letter stating that the "call-back" scheme was illegal under Mexican law and requesting that MCI suspend service it provided to any customers engaged in this practice. In April 1994, Telmex sent MCI a letter explaining that "resale" was illegal under Mexican law and requesting a list of customers providing resale. Telmex stated that it would then forward MCI a list explaining who would be disconnected and when. MCI responded a month later, requesting a copy of specific laws and regulations prohibiting resale. MCI's response also explained that it did not understand the definition of resale under Mexican law. Furthermore, MCI refused to supply the customer list, asserting that this disclosure is illegal under United States law. In July, after consulting with SBI, Telmex began disconnecting I800 numbers it determined were being used for resale, including some numbers LDI acquired through SMS's contract with MCI.

In 1996, LDI/SMS sued Telmex and SBI for tortious interference with contractual relations, tortious interference with prospective relations, conspiracy to commit tortious interference, breach of contract, antitrust, and Texas Deceptive Trade Practices Act violations. The trial court granted Telmex and SBI summary judgment on all claims. The court of appeals affirmed, holding that because LDI/SMS was violating Mexican law, it could not maintain any of its claims. 18 S.W.3d 706, 714-15. On identical facts, the Fifth Circuit recently reached the opposite result, concluding that LDI/SMS's conduct did not violate Mexican law. Access Telecom, Inc. v. MCI Telecomms. Corp., 197 F.3d 694, 716 (5th Cir. 1999), cert denied, 121 S. Ct. 292 (2000).

We granted LDI/SMS's petition for review to decide whether LDI/SMS's contracts violated Mexican law, and, if so, whether that illegality would provide a defense to the plaintiff's claims. Because we determine that LDI/SMS did not violate Mexican law, we reverse the court of appeals' judgment and remand to the court of appeals for it to consider whether any other asserted ground supports the trial court's summary-judgment order.

II. SUMMARY JUDGMENT--STANDARD OF REVIEW

A defendant moving for summary judgment on an affirmative defense has the burden to conclusively establish that defense. Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999). Determining foreign law presents a question of law for the court. Tex. R. Evid. 203. Because the parties do not dispute the relevant facts, this is a proper case for summary judgment. Havlen v. McDougall, 22 S.W.3d 343, 345 (Tex. 2000).

III. DID LDI/SMS'S CONTRACTS VIOLATE MEXICAN LAW?

A. Foreign Law--Standard of Review

Texas courts may apply Mexican law. Gutierrez v. Collins, 583 S.W.2d 312, 321 (Tex. 1979). The court, and not a jury, determines the laws of foreign countries. Tex. R. Evid. 203. A party who intends to raise an issue about foreign law shall give notice, and, at least thirty days before trial, shall furnish all parties copies of any written materials or sources the party intends to use to as proof of foreign law. Tex. R. Evid. 203. If the materials or sources were originally written in a language other than English, the party relying upon them shall furnish all parties both a copy of the foreign-language text and an English translation. Tex. R. Evid. 203.

Rule 203 has been aptly characterized as a hybrid rule by which the presentation of the foreign law to the court resembles the presentment of evidence but which ultimately is decided as a question of law. Ahumada v. Dow Chem. Co., 992 S.W.2d 555, 558 (Tex. App.--Houston [14th Dist.] 1999, pet. denied); Lawrenson v. Global Marine, Inc., 869 S.W.2d 519, 525 (Tex. App.--Texarkana 1993, writ denied). Summary judgment is not precluded when experts disagree on the law's meaning if, as here, the parties do not dispute that all the pertinent foreign law was properly submitted in evidence. Bridas Corp. v. Unocal Corp., 16 S.W.3d 893, 896 (Tex. App.--Houston [14th Dist.] 2000, pet. denied). When experts disagree on how the foreign law applies to the facts, the court is presented with a question of law. Bridas Corp., 16 S.W.3d at 896; Ahumada, 992 S.W.2d at 558-59. We review the trial court's determination of foreign law de novo. See Tex. R. Evid. 203; El Paso Natural Gas Co. v. Minco Oil & Gas, Inc., 8 S.W.3d 309, 312 (Tex. 1999) ("Because the issue . . . [involves] a question of law, our review is de novo.").

B. The Record

Both parties, complying with Rule 203, requested that the trial court take judicial notice of certain Mexican-law provisions. Both parties provided copies and translations of the concession empowering Telmex to "build, install, maintain, operate and exploit a public telephone network for a period of 50 years, beginning March 10, 1976[,] throughout all the national territory, except the area under license to Telefonos del Noroeste, S.A. de C.V." This concession was modified on December 10, 1990. The pertinent sections of...